Sunday, June 24, 2007

Verizon's fiber-optic payoff | CNET News.com

Food for Thought, Learning from the Big Guys Division:

"Verizon's fiber-optic payoff;" The premise of this story is that Verizon did right by going with a Fiber To The Home plan...and AT&T/BellSouth messed up by trying to get by on the cheap. Verizon will have the bandwidth and the flexibility to compete more than adequately against the cable companies. But AT&T will not, on the basis of this author's analysis.

Lafayette can mine Verizon's experience for insight into how an all-fiber network can compete against the cablecos. Verizon will be several years ahead of LUS in the deployment of a new fiber system and its successes can be followed and its failures avoided. Verizon is, happily for Lafayette, not the incumbent locally. It's enormous numbers will allow suppliers and developers for its products to supply a place like Lafayette almost as an afterthought--and at reasonable prices since the big-ticket purchaser is the giant Verizon. Even better, the also-rans on giant Verizon contracts will be looking for a place to prove their ideas. If Lafayette's buyer's are wise we'll be able to cut some interesting deals on cutting-edge ideas that badly need a place to demonstrate that their ideas are viable before marketing it to the big fellow. A real danger has always been that LUS would be so far ahead of what the market in other places can provide that useful products would have to be untested and hand-crafted for us. That could be exciting...but expensive. Much better to have a big trailblazer proving basic concepts somewhere else. Then we only have to lay in a better implementation.

Apparently Verizon is succeeding. Thought its stock has taken a hit because of its heavy, long term investment in fiber has suppressed earnings its subscriber numbers are very healthy for the same reason. Its bet on a combination of old-style cable technology, fancy new IPTV for the extras, and fiber to the home capacity is allowing the company success in delivering both a high-quality, reliable TV experience, and fancy new IP services. AT&T, on the other hand, has high stock prices but low subscriber numbers for its new hybrid fiber/DSL that uses unstable IP for all its services. If I were looking at a long-term investment I know where my money would go.

The ticket for Verizon so far appears to be sticking to the absolutely reliable technology on the cash cow—cable TV—and using the capacity of fiber to deliver more channels; especially to deliver more bandwidth-hungry HDTV. In addition they are mounting an aggressive push into IP-based services. Verizon is clear about the need to migrate to a full IP system as soon as the technology is proven and it, and AT&T's committment, ensures that the kinks will be worked out of IPTV sooner rather than later. All in all Verizon's success validates the similar decisions made by the technical guys at LUS; the bottom line is that it's good news for LUS.

Is there a downside for Lafayette? Sure. LUS may not compete with Verizon but Cox does. And as Verizon proves that fiber means deadly competition Cox is more likely to feel the pressure to develop effective ways to expand its own bandwidth and competitive delivery of services. But that's not all bad of course--for the consumer. The catch for Cox is that Verizon is currently succeeding without competing much on price. LUS will and that and the local loyalty that LUS has gained (and Cox forfeited) makes LUS a much tougher target locally than Verizon is through most of its footprint.

The real loser? AT&T/BellSouth who will have the least capable system in the city and very little room to really compete on price.

No comments: